What is likely to happen with interest rates?

Last week’s data suggest the Bank may be more reluctant to cut rates - bad news for existing homeowners with tracker mortgages and for future homebuyers who were hoping fixed-rate mortgages would come down.

The figures are a big departure from a month ago when the market predicted Bank rate would fall to 4% or less by the end of 2009.

However, some economists are more optimistic than the markets. Most forecast at least one more quarter-point rate-cut before the end of the year. This would take the bank rate to 4 75%. However, the money markets, which reflect City expectations, are forecasting a rate of 4.98% in November.

So should I go for a fix or tracker?

The best fix on offer is from Woolwich at 5.49% for borrowers with a 40% deposit. On a ₤200,000 loan, repayments work out at ₤1,226 a month. The best tracker is from Principality at 5.75% for borrowers with a 25% deposit or equity in their home. On a ₤200,000, loan repayments on the Principality deal work out at ₤1,258 or ₤1,228 if there is another cut to official rates by the end of the year, so you would be slightly better off with a fix.

My deal doesn’t end until the autumn. What should I do?

Nationwide and Abbey will let you book a rate six months in advance. However, you should check the end date on the term.

Abbey’s two-year deals end in August 2010, so if your current deal expires after August this month you may not get the benefit of the full two years on the advertised rate. Those two months could add ₤334 to the cost of a ₤200,000 loan if you default to their current standard variable rate (SVR) at 7.09%. Nationwide’s deals apply for two years from the date of completion.

<== попередня сторінка	\|	наступна сторінка ==>
Lenders to Lift Mortgage Rates	\|

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